Note to workings (Prime cost (direct costs) – To max 3 marks):
Direct costs are cost objects that are directly attributable to the finished product, these can be direct materials, direct labour and direct expenses related to the production of the finished product. Prime cost is the total of all direct costs (material, labour and expenses).
Quantity x price rate = total
E.g. for machining department ‘Carom’:
450 x 12 = 5,400 1,200 x 8 = 9,600 2,230+5,400+9,600=17,230
Total prime cost for Order 2169 ‘Carom’: 17,230+8,370+9,650 = 35,250
Total prime cost for Order 2170 ‘Horal’: 12,900+14,480+11,370 = 38,750
Total prime cost for Order 2171 ‘Pecan’: 12,600+16,960+16,640 = 46,200
To max 3 marks for accurate completion of this table:
Note …show more content…
On the other hand, Pecan achieves the lowest full cost per unit of £12.13 and produces the highest amount of units, 6,000.
On the trading accounts, Pecan produces a sale of £59,400 (5400 products sold out of 6000 products produced, £11 each) but however still makes a loss of £6,102 in the gross profit (absorption system) which is -10.27% gross profit margin. In comparison to the gross profit (marginal system), it achieves a total contribution of £17,820 with a C/S ratio of 30%. If Pecan can achieve a sales of 5,955 units then it can breakeven with the cost of sales for the absorption …show more content…
The potential benefits of introducing an ABC system for Kauris Ltd can help in FMIS decisions, including management decision making, planning future actions and resource commitments and control for the achievement of plan objectives. This provides improvements in sufficiency, accuracy and relevance of information for decision making purposes which can be beneficial to Kauris Ltd in identifying wasteful products or unnecessary costs and improve business processes (can identify non-valued added activities and can help better allocate resources for more efficiency and profitable activities, possibly adding more value even). Overall, the ABC provides good quality information and is formatted suitably for the
Direct costs are cost objects that are directly attributable to the finished product, these can be direct materials, direct labour and direct expenses related to the production of the finished product. Prime cost is the total of all direct costs (material, labour and expenses).
Quantity x price rate = total
E.g. for machining department ‘Carom’:
450 x 12 = 5,400 1,200 x 8 = 9,600 2,230+5,400+9,600=17,230
Total prime cost for Order 2169 ‘Carom’: 17,230+8,370+9,650 = 35,250
Total prime cost for Order 2170 ‘Horal’: 12,900+14,480+11,370 = 38,750
Total prime cost for Order 2171 ‘Pecan’: 12,600+16,960+16,640 = 46,200
To max 3 marks for accurate completion of this table:
Note …show more content…
On the other hand, Pecan achieves the lowest full cost per unit of £12.13 and produces the highest amount of units, 6,000.
On the trading accounts, Pecan produces a sale of £59,400 (5400 products sold out of 6000 products produced, £11 each) but however still makes a loss of £6,102 in the gross profit (absorption system) which is -10.27% gross profit margin. In comparison to the gross profit (marginal system), it achieves a total contribution of £17,820 with a C/S ratio of 30%. If Pecan can achieve a sales of 5,955 units then it can breakeven with the cost of sales for the absorption …show more content…
The potential benefits of introducing an ABC system for Kauris Ltd can help in FMIS decisions, including management decision making, planning future actions and resource commitments and control for the achievement of plan objectives. This provides improvements in sufficiency, accuracy and relevance of information for decision making purposes which can be beneficial to Kauris Ltd in identifying wasteful products or unnecessary costs and improve business processes (can identify non-valued added activities and can help better allocate resources for more efficiency and profitable activities, possibly adding more value even). Overall, the ABC provides good quality information and is formatted suitably for the